Even more Americans could see their student loans forgiven after the Biden administration announced how those struggling with their payments could have their debts wiped.
The proposal unveiled on Thursday outlines multiple factors the Education Secretary may consider to determine whether borrowers are facing the type of hardship that would get them relief.
The Biden administration has already cancelled $136.6 billion in student loan debt for 3.7 million borrowers, but the Supreme Court struck down President Biden’s original $400 billion plan to cancel it last June.
Critics have accused Biden of abusing his authority and punishing taxpayers who didn’t get a college education.
Some factors for hardship include the borrower’s total student loan balance and required payments relative to household income and whether a borrower is facing high financial burdens for essential expenses like healthcare or childcare.
Other considerations include whether the borrower received a Pell Grant, age, disability and other other indicators identified by the secretary.
The proposal would provide automatic relief for borrowers who are highly likely to be in default in two years. Those borrowers would be identified through a method developed by the Education Department using information in the secretary’s possession.
It would also allow the Education Secretary to provide additional relief to borrowers experiencing hardship through an application process.
Education Secretary Miguel Cardona standing alongside President Biden at the White House. The new draft proposal includes multiple factors the secretary may consider to determine whether borrowers are facing financial hardship that would qualify them for student loan relief
Protesters gathered outside the Supreme Court as the court blocked President Biden’s previous student loan relief plan
‘The ideas we are outlining today will allow us to help struggling borrowers who are experiencing hardships in their lives, and they are part of President Biden’s overall plan to give breathing room to as many student loan borrowers as possible,’ said Under Secretary of Education James Kvaal in a statement.
‘It’s an important part of the Biden-Harris Administration’s permanent solutions to the problem of unaffordable loans,’ he added.
The draft proposal was released by the Education Department on Thursday ahead of further rulemaking discussions February 22 and 23.
‘The new rule’s expansive definition of hardship proposed today will drive debt relief to anyone who had to borrow for college and still struggles to stay afloat,’ said Persis Yu, Deputy Executive Director at Student Borrower Protection Center in response to the draft proposal. ‘
‘The new hardship rule is a strong step in the right direction, creates an important safety valve to cancel debt when things don’t go according to plan, and provides millions of people with a second shot at the economic opportunity they were promised,’ Yu said.
This is the latest in an ongoing effort by the Biden administration which has been slowly chipping away at the more than $1.74 trillion in student loan debt in the United States.
Demonstrators calling for student loan debt forgiveness outside the Supreme Court on June 30, 2023 as the conservative court struck down Biden’s student loan relief plan
Last summer, the administration launched the SAVE program, an income-driven repayment plan that calculates payments based on a borrower’s income and family size, not their loan balance. It forgives the remaining balances after a certain number of years.
According to the administration, the SAVE plan will cut many borrowers’ monthly payments to zero and will save other borrowers around $1,000 per year.
The administration has also taken multiple other steps to cancel student loan debt since the president took office in 2021.
To date, the administration has canceled $136.6 billion in student loan debt in total for more than 3.7 million borrowers.
It included $45.7 billion for more than $930,500 borrowers through changes to the income driven repayment (IDR) plans which brought thousands of borrowers closer to having loans forgiven as well as $56.7 billion for more than 793,000 borrowers who have benefitted from changes to the public service loan forgiveness (PSLF) program.
The administration also canceled billions in debt for borrowers with total and permanent disability and those who were defrauded by their schools.